INDIVIDUAL TAX GUIDE - PNG

Residency test
Does total number of days of stay in PNG exceeds 183 days in a calendar year?
2

Yes

Resident tax rates apply

No

Does the individual intend to take up residence in PNG?

No

Yes

Is the usual place of abode in PNG?

No

No

Yes

Is individual a resident of a treaty country and satisfy certain additional conditions

Non- Resident tax rates apply

Not liable to tax in PNG

Every employee must furnish to his employer a Salary or Wages Declaration at the time of commencement of his employment. In this declaration the employee is required to state his residential status, details of his dependents and allowances or benefits received by him. The completed form must be signed both the employee and employer and lodged with the Internal Revenue Commission (IRC) on or before the due date of next monthly remittance of salary or wages tax. Where an employee has indicated that he is a non-resident the employer is required to apply the nonresident tax rates in calculating the salary or wages tax. Where he has indicated resident then resident rates needs to be applied. An employee whose usual place of abode is outside of PNG is generally required to provide evidence to support his contention. He should show that his habitual abode is outside of PNG, he has closer personal and economic ties with a country other than PNG (e.g., maintaining a family outside of PNG) and there is nothing to show that he intends to reside in PNG permanently.

INDIVIDUAL TAX GUIDE - PNG

Tax Rates (for tax year beginning 1 January 2008)

Taxable income Resident*
PGK PGK PGK PGK PGK

Tax rates Non-resident

PGK

0 10,001 18,001 33,001 70,001 250,001

*Where

10,000 18,000 33,000 70,000 250,000 and above

0+ 1,760+ 6,260+ 19,210+ 91,210+

22% of each amount above 10,000 30% of each amount above 18,000 35% of each amount above 33,000 40% of each amount above 70,000 42% of each amount above 250,000

0+ 2,200 + 3,960+ 8,460+ 21,410+ 93,410+

22% of each amount 22% of each amount above 10,000 30% of each amount above 18,000 35% of each amount above 33,000 40% of each amount above 70,000 42% of each amount above 250,000

a resident has filed a dependent declaration, he is entitled to a deduction of following dependent rebate PGK450.06 PGK750.10 PGK1,049.88

from the tax calculated above 1 Dependent = 2 Dependent = 3 or more dependents =

Housing benefits (for tax years beginning 1 January 2011)

Type of Housing Market Value
PGK

Rent per week

PGK

Area 11
PGK

Area 22
PGK

Area 3
PGK

High cost Medium cost Low cost Mess/Barrack Accommodation Government Mess/ Barracks Approved Low cost Housing Scheme

=/> 800,000

=/> 3,000

18,200 p.a 10,400 p.a 4,160 p.a 1,560 p.a 182 p.a Nil

13,000 p.a 7,800 p.a 3,900 p.a 1,300 p.a 182 p.a Nil

Nil Nil Nil Nil Nil Nil

400,001-799,999
</=

1,001-2,999
</=

400,000

1,000

1 Located in or within 15 Km radius of boundaries of Port Moresby, Lae, Goroka, Madang and Mount Hagen. Also includes any overseas accommodation. 2 Located in or within 15 Km radius of boundaries of Alotau, Bulolo,Daru, Kainantu, Kavieng, Kerema, Kimbe,Kiunga, Kokopo, Kundiawa, Loregua,

Mendi,Popondetta, Porgera, Tabubil, Vanimo,Wabag,Wau, Wewak.

INDIVIDUAL TAX GUIDE - PNG

Housing allowance paid in lieu of accommodation

Housing allowance provided in lieu of accommodation is fully assessable unless a variation is obtained. An employee is allowed to make an application for variation and provides details of actual cost of accommodation incurred. Once satisfied the Commissioner may direct that only the excess allowance over actual cost of accommodation may be taxed. Generally such variation is not retrospective and hence it is advisable to lodge
4

variation applications immediately upon commencement of the financial year. Click here to download the form. Housing allowance is not assessable for citizen employee engaged in Approved Low Cost Housing Scheme.

Motor vehicles
Type of vehicle Unrestricted Usage Restricted Usage Benefits provided Overseas
PGK

PGK

PGK

Car supplied with fuel Car supplied without fuel

3,250 p.a 2,470 p.a

As determined by Commissioner As determined by Commissioner

Actual cost to employer Actual cost to employer

Meals
Type of meals Taxable value Benefits provided Overseas

PGK

PGK

Messing type meals

780 p.a
Actual cost of meals

Actual cost of meals

Other

Actual cost of meals

Public utilities (electricity, water, gas, sewerage, land rates etc.)

How Paid Deductibility for Employer Taxability for Employee

PGK

PGK

Directly paid by employer to service provider Paid as an allowance to employee

Non deductible Deductible however must not exceed actual cost of expense

Non taxable Taxable

INDIVIDUAL TAX GUIDE - PNG

Telephone
Telephone expenses are generally considered private expenses and fully assessable to employee however where they are work related then a variation will be considered.

Security and Domestic Servants

How Paid Deductibility for Employer Taxability for Employee

PGK

PGK

Directly paid by employer to Service Provider Paid as an allowance to employee

Non deductible Deductible however must not exceed actual cost of expense

Non taxable Taxable

School fee
How Paid Deductibility for Employer Taxability for Employee

PGK

PGK

Directly paid by employer to Service Provider allowance to employee

Fully deductible provided not for tertiary studies Fully deductible

Non taxable

Paid as an

Excess amount over actual cost of school fee paid

Superannuation
Employees are not allowed to make tax free contribution to Superannuation funds however tax on Employer Contribution can be deferred or reduced depending on the period of contribution and age of employee as below.
Distributions Tax rate applicable

Amount accrued prior to Contributions 15 Contributions more

1 January 1993

2% 2% 2% 2% 8% 15% Marginal rate

years or more

7 years or more and age 50 years or

or

Upon

Death

Permanent Disability 9 years and not more 5 years and not more

Contributions not less than than 15 than 9

years

Contributions not less than

years

All other cases

INDIVIDUAL TAX GUIDE - PNG

There is no mandatory requirement to contribute superannuation for expatriate employees.

6

Gratuity and Terminal Payments

Nature of payment Tax rate applicable

Amount accrued prior to

1 January 1993 and employee has completed at least

2%

6 years of employment.
Accrued after 1

January 1993

No change in tax rates in the period to

which payment relates

Spread over previous 26 fortnights and taxed at applicable marginal rate. Maximum period over which the payments are spread are extended to 6 years and taxed at applicable marginal rate.

Change

payment relates

in tax rates in the period to which

Tax rebates
An employee is allowed to claim rebate on certain expenses incurred by him as below.
Nature of expenses Maximum Limit How to claim

PGK

Education expenses incurred in relation to a dependent student child

Any expenses necessary of employment

Lesser of 25% of net education expenses (or) K750 per child 25% of expenses provided it does not exceed total salary or wages tax paid in that year.

Lodgement of income tax return within 2 months of calendar year Lodgement of income tax return within 2 months of calendar year

incurred in the course

Tax clearance certificate

Transfer of an amount/s exceeding PGK500, 000 from a resident account to a non-resident account within a calendar year needs to be supported by a Tax Clearance Certificate from the IRC. Click here to download the application form.

INDIVIDUAL TAX GUIDE - PNG

For more information please,

Email Hariharan at hariharan.bm@shishya.net Mail to 7 P.O.Box 2318, Boroko, NCD Papua New Guinea

Disclaimer This document is prepared to provide a general overview of the individual taxation in Papua New Guinea and is not meant to be an expert document. The author does not accept any responsibility to any person for any statement, opinion, omission or error.